You could potentially own eighteen properties before paying any land tax as long as you plan things out properly.
In NSW, it will cost you an extra $6,000 in land tax for no valid reason. However, if the second property is in your spouse’s name then you have doubled your land tax threshold or saved $6,000 a year in land tax.
That’s a substantial amount of money, as property is a long term investment. Over ten years that is a saving of $60,000 or $120,000 over twenty years of land tax that need not have been paid, by obtaining proper tax advice and forward planning prior to entering the incorrect name on the Contract of Sale.
Once you have “used up” your land tax threshold in one State then by buying property in another State the land tax threshold starts again, since land tax is a State Tax.
If you are currently paying land tax, you must be doing something wrong.
The old saying “one does not plan to fail, one fails to plan” is true in most things in life including the amount of land tax you pay.
For example, if you buy a property in partnership between two people then you have lost one whole land tax threshold.
A word of caution: You should get proper tax advice before investing in property.
If the property is negatively geared it should be in the name of the person who is paying the higher income tax no matter what the land tax threshold is because you will lose more in income tax than land tax payable if held in the wrong name.
If the property is positively geared then it should be in the name of the person who is currently paying the lower income tax which will help your land tax planning.
As you can see its quite complex and in 50% of the cases you should hold it in a Trust which will also save you land tax in some States.
Please remember to take advice BEFORE you exchange contracts and not AFTER you exchange contracts. Once you have exchanged contracts it’s too late. The best time to take advice is when the Contracts of Sale is in your Solicitors hands and they are doing the conveyance.
You should contact us to determine the right name to put on that contract. It could be the last thing the solicitor does before exchanging contracts.
Non-Executive Chairman of Chan & Naylor Accountants
Disclaimer: The above information is for general knowledge purposes only. Please take advice for your specific situation before investing in property. Every person’s personal situation is different and requires a different solution.